Neal Fox | Contracting in Perspective: Will GSA Eat SEWP?

Neal Fox

So GSA wants to absorb NASA's SEWP GWAC contract vehicle. Would this enhance governmentwide procurement, and has anyone asked SEWP's customers?

I doubt either.

On the surface, an all-powerful GSA in charge of all government acquisition sounds just fine. OK, so maybe it doesn't. But let's assume for a minute that it could happen. So what?

We can understand the GSA administrator's view on this. She wants to stop the leakage of business from GSA, especially since their finances are not what they used to be. SEWP looks like an easy target at first, since it is a true GWAC under Clinger-Cohen definitions, and because GSA's IT Schedule offerings can supply all the categories SEWP covers. But the very fact that customers use SEWP to buy over $500 million worth of IT products annually, and that Veterans Affairs has recently decided to become a steady customer of SEWP, requires a serious review of what they bring to the table.

By the way, NIH ECS GWAC, we see you hiding over there. GSA will get around to you soon enough.

One must first ask how SEWP can even survive in the shadow of GSA and its Information Technology Schedule. The GSA IT Schedule works great, and government acquisition would be lost without it. This is also the gem of GSA and pays the bills. Well, almost, but that's another issue. SEWP exists because it provides value in certain areas where the IT Schedule has not. At firs, SEWP was a rudimentary form of strategic sourcing for high-end workstations. But now it continues to exist for several important reasons; namely, because it does not need to meet all the requirements that GSA must meet, because it can cherry-pick what it offers and because GSA has not kept up with the customer.

Not that SEWP should have to be all things to all people as GSA is required to be. GSA must support all those little governmentwide goals, such as maximum small-business inclusion, must take in all vendors who want to play, must not favor one IT vendor at the expense of the others, and a hundred other mandated play-nice goals thrust on it by Congress and others, or else self-imposed. GSA must carry that burden for the federal government. But SEWP doesn't, and probably shouldn't. Some things just are.

SEWP also enjoys a little window of opportunity that allows it to cherry-pick opportunities and play as a 'GWAC tweener.' It plays in that space between GSA and agency single-award contracts, and between schedule pricing and strategic sourcing, where it chooses what it wants to offer and which vendors it will allow to play. It offers mainly IT products and some associated low-end IT services from a small number of vendors, and not nearly on the scale offered through the IT Schedule. SEWP provides contracts with only 18 companies, while the IT Schedule has over 6000. By the way, all 18 are also on the GSA IT Schedule.

Doesn't sound like SEWP should be able to survive, does it? If those two issues were SEWP's only advantages, it would not have survived. Customers would not have seen the value. But the last and only significant one of the three reasons SEWP survives is that it fills a void left by GSA's failure to keep up with the customer.

SEWP has filled a void created and maintained by GSA's failure to keep up with the changing needs of the customer, making itself useful to customers in some strategic ways. First and foremost, GSA takes way too long to add new technology products to the IT Schedule. This is due to GSA's insistence on maintaining an antiquated modification process for adding new products, despite having the solution readily available. GSA's mod process worked OK when GSA only had a few contracts, but keeping those ever-changing IT product contracts up to date for several thousand vendors is a nightmare, and something GSA does very poorly. As a result, GSA cannot keep up with the latest changes in product technologies. But SEWP does, which allows it to siphon off business that should go to GSA. The IT Schedule is always one step behind SEWP when it comes to the latest technology products, which means the GSA Advantage electronic procurement Web site cannot stay current. It is no surprise that federal customers want to buy the latest technologies. SEWP consistently delivers, and GSA does not. GSA vendors rightly complain that they cannot offer their latest technologies to GSA customers because of the burdensome GSA modification process.

So the odd fact is that GSA keeps SEWP alive by not providing what SEWP provides to customers. And until it does, SEWP should be allowed to meet the needs that GSA currently neglects. The other oddity is that GSA does not need to have OMB shut down SEWP. GSA could do that by serving the customer in the ways that SEWP does, which would make SEWP irrelevant.

So what does GSA need to do to put SEWP out of business? At the risk of repeating earlier articles, here are the main items that allow SEWP to exist:

GSA continues to use an antiquated contract modification process. GSA already has in hand a solution that would eliminate 95 percent of all contract modifications for adding products to the schedules. This has already been proven at GSA but then virtually abandoned during the GSA Get It Right implosion. GSA schedules continue to put detailed product information and individual prices into the basic schedule contract. A new process called Quick-Mod has already been piloted successfully for products on the IT Schedule, and uses relationship pricing (either maximum allowable markup from vendor cost for resellers, or minimum markdown from retail prices for manufacturers). This renders nearly all product modifications unnecessary and brings new products to the customer much faster. When this process was piloted on the IT Schedule for a major vendor, SEWP sales fell dramatically, and GSA picked up those lost SEWP sales. When GSA decided to keep their outmoded processes, SEWP regained momentum. So GSA, blame yourself for SEWP's continued existence. They fill a critical customer need that you should, but do not.

GSA needs to use better ordering procedures to reduce GSA assisted-services process costs on products. Services orders are by nature complex, but product ordering can and should be simplified by electronic processes. GSA loses money on many assisted-services orders for products because it uses manpower-intensive processes.

In contrast, GSA can make money on complex services orders, which is where they should focus their manpower. SEWP does not try to compete with GSA's FEDSIM, which provides assisted services for complex IT services, and does it very well. SEWP excels at enabling product ordering through excellent online and assisted services, and does so very efficiently. By comparison, GSA is inefficient at assisted services for product ordering, with some exceptions. GSA's Southeastern Region in Atlanta places product orders through electronic processes such as eBuy, FedBid and similar electronic processes that drive out unnecessary and time-consuming contracting actions. But other GSA ordering processes, and especially GSA's Global Supply, are very inefficient and lose money.

Expanding the best practices GSA has already proven in the GSA Atlanta office would go a long way toward beating SEWP at its own game. This would also allow reductions in staff for assisted services (former FTS) and Global Supply as GSA shifts to a full array of electronic processes to reduce the cost of procuring products. So once again, GSA has the solution available but ignores it.

If GSA did take over SEWP, what would they do with it? Would they keep it running inside GSA? Wouldn't work. If the GSA administrator thinks SEWP duplicates GSA offerings, then she can only shut it down. Plus, GSA could not show favoritism to those 18 SEWP vendors over the several thousand others GSA already has on the IT Schedule, most of which are small businesses. And if SEWP falls, it can't stop there. NIH's ECS III would be the next domino to fall. And what about non-GWACs like DHS EAGLE and FirstSource? Can you smell scorched earth?

But what would it accomplish if GSA shuts down its competition without fixing the problems that drove customers to SEWP in the first place? Nothing good for the customer. And remember, customers despise mandatory anything, because they lose their status as customers and become dependents. Never underestimate the power of the customers. They will ultimately get what they want.

GSA already controls the destiny of SEWP. It does not need OMB to forcibly shut SEWP down so GSA can continue to use outmoded processes and live in a bloated cost structure. The very fact that SEWP thrives in the shadow of GSA proves its value to the customer, a value that GSA handed to them and continues to nurture. The Post Office decried the advent of UPS and FedEx, and sought legislation to restrict their entry into the market. GSA could learn a lot from that historical lesson.

Neal Fox is a retired Air Force colonel and former assistant commissioner for commercial acquisition at GSA. He manages Neal Fox Consulting ( NealFoxConsulting.com) and can be reached at nfox@usa.com.

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